Bashing last year's Dodd-Frank financial reform law has become something of a sport on the GOP campaign trail. Critics charge that the bill kills jobs through regulatory overreach.
But former Senate Banking Chairman Christopher Dodd, D-Conn., who sponsored the bill along with Rep. Barney Frank, D-Mass., says the people who bash the law are wrong about its “purpose and impact.” He addressed five "myths" about the bill in an op-ed published in The Washington Post:
- Dodd-Frank isn't making the economic slowdown worse. It was the opaque and reckless financial system that got the U.S. into the economic mess in the first place, Dodd said. Just 10 percent of the law’s provisions have been implemented -- hardly enough to justify charges that the law creates job-killing uncertainty, he said. There are plenty of other headwinds to economic recovery, including the housing market, budget deficit, and global sovereign debt crisis.
- The law isn't hurting small business or community banks; it is aimed at the largest, most complex Wall Street firms. That some regulators have become overzealous is a product of the post-crisis environment and not Dodd-Frank, Dodd wrote.
- Dodd-Frank didn't fail to reform Wall Street—it “fundamentally transformed our financial system,” Dodd said. The United States’s regulatory structure hadn’t been adequately update since the 1930s, and there is still more work to be done, he added.
- Congress hasn't ignored the housing crisis; it addressed problems with the mortgage-lending giants Fannie Mae and Freddie Mac through bipartisan regulation that created “a regulator with real teeth” and put Fannie and Freddie into conservatorship, Dodd said. The law also addressed risky housing-market practices.
- Dodd-Frank should not be repealed. “Whether or not you agree with the law’s provisions, repealing it would return us to a time in which nobody — not consumers, not regulators, not even other banks — knew what the Wall Street gamblers were doing until it was too late,” Dodd said. “It would destroy confidence in our markets and faith in our financial system, certainly hindering our recovery. It would again leave Americans at the mercy of those who have already ripped off too many families and businesses.”
Without the Dodd-Frank law, the U.S. -- and global -- economies risk an even greater meltdown, Dodd warned.